The Effect of the Commercialization Failure of SMEs' R&D on Survival

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Abstract

While the cases of small and medium enterprises (SMEs) that succeeded in research and development (R&D) have been relatively well known and studied, there has not been sufficient research on cases of R&D failure and the consequent costs. Based upon the resource-based view, we hypothesized that the commercialization failure of SME's R&D would be more severe for smaller firms lacking resources and dynamic capabilities, leading to early business closure. We analyzed 2038 formal R&D projects implemented by South Korean SMEs with the support of a public subsidy program. We found that if an SME that implemented the R&D project failed to commercialize the outcomes of the R&D, the probability of business closure within five years after the completion of the project is 72% higher than if it succeeded. We also found that the commercialization failure increases the risk of business closure, particularly for smaller firms, due to a significant slowdown in sales growth. Our findings underscore the importance of the R&D planning strategies for SMEs and the need for funding agencies to improve their program segmentation and beneficiary selecting process.

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APA

Yoo, H. S., & Jung, Y. L. (2024). The Effect of the Commercialization Failure of SMEs’ R&D on Survival. IEEE Transactions on Engineering Management, 71, 6078–6089. https://doi.org/10.1109/TEM.2024.3378690

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